JohnNeelyKennedyP.O.Box44154

StateTreasurerBatonRouge,LA70804

(225)342-0010

To:The Honorable John Bel Edwards, Governor of Louisiana

TheHonorable LouisianaSenate

The Honorable LouisianaHouse ofRepresentatives

FROM:John NeelyKennedy, State Treasurer

RE:Annual Summaryon the Financial Condition oftheState ofLouisiana Fiscal Year2014-2015

DATE:March 8, 2016

Please seethe attached document containingthe Louisiana Department oftheTreasury’sannual summaryon the financialcondition ofthe state. Thisinformationisbeingreported to you pursuant to Article IV, Section9 oftheLouisianaConstitution of1974.

In thisyear’s summary, we provide dataaboutstateinvestments,cash flow, debt issuances, state trust funds, Unclaimed Property,theStudentTuition Assistance and RevenueTrust(START)savingsprogram, theLouisiana Asset Management Pool (LAMP), and SocialSecurity. We also compare investment figures and program performanceforFiscal Year 2014-2015 (FY2015) andFiscal Year 2013-2014 (FY2014).

Treasurywill continue itseffortsto earn thebest rate ofreturn possible on taxpayer dollars, consistent withpreservation ofcapital. Welook forward to workingwith youand our other stateofficialsto fulfill our mission ofpromotingprudentcash management andinvestment strategies.

For more information about theTreasurythat maynot be included in the attached summary, please visit call (225) 342-0010.

AnnualSummaryoftheFinancialCondition of the State

INVESTMENTS DIVISION

The Investments Divisionisresponsible for investingthe moniesdeposited intheTreasuryto earn a reasonable rate ofreturnwhilemaintainingsafetyofprincipalandliquidityto meet the state’scash flow needs.

Aspart ofthe cash management program ofthe State ofLouisiana, the Investments Division maintains several investment portfolios, collectivelyknown astheGeneral Fund, each with differingcharacteristics.

During FY2015,

  • The Treasurymanaged $7.2 billionin statutoryand constitutionallycreated fundsin FY 2015compared to $8.6 billion in FY 2014. Earningson these fundstotaled $175 million in FY 2015 and $229.8million in FY2014.
  • Thecumulative income oftheGeneral Fund investment portfolios(1968-present) was $6 billion at the end ofFY 2015. Thecumulative incomeexceeded the$5 billionmarkat the end ofFY2011.
  • TheGeneral Fund investmentportfoliosfinished FY 2015with $3.8billion in invested balances, $37.2 millionin earningsfrom investmentactivitiesand acash basis simple yield of0.94 percent. Thiscomparesto $4.5billion in invested balances, $53.4 millionin earningsfrom investment activitiesand acash basis simple yield of1.04 percent attheendofFY2014.
  • The Treasuryawarded $229.8 millioninCertificatesof Deposits (CDs) to 64 banks statewide through the Treasury’selectronic auctionwebsite, BidLouisiana. Thiscompares to $183.1million in CDsfor 49 banks statewide in FY2014. Since inception, Treasury has awarded 953 CDs and $2.984 billion in CDs placed with Louisiana financial institutions through the BidLouisiana auction process, making BidLouisiana a stable source of funding for Louisiana financial institutions’ economic development through their lending capabilities.

StateTrustFunds

The Investments Divisionalso manages$3.2billionin cost value, $3billion in market value, of securitiescontained instate trust funds.Thesetrust fundsinclude theKevin P. Reilly, Sr.Louisiana EducationQualityTrust Fund (LEQTF), Millennium Trust Fund, Medicaid Trust Fundforthe Elderly, and theTransportation TrustFund.

The LEQTFwascreatedin 1986 byan act ofthe Louisiana Legislature andan amendment to theLouisiana Constitution passed by Louisiana citizens. Investment income generated bythe fund isdedicated tothesole purpose ofprovidingeducationalenrichment programs. TheactsestablishedtheBoard ofElementaryandSecondaryEducation(BESE) and theBoard ofRegents asbeneficiaries.In addition,theactsalso provided for the investment ofthesefundsbythe State Treasurer.

  • The market valueoftheLEQTFat theend ofFY 2015was$1.3 billion, the cost value was $1.2billion, with earningsof$40.6 millionand atotal return rate of3.9 percent. Thiscomparesto amarket value in FY2014 of$1.3 billion, earningsof$92.7 million,and atotal returnrate of11.4 percent.

The MillenniumTrust Fundwascreated byAct 1295 ofthe Legislative RegularSession of1999and establishedasa special permanent trust fundin theTreasury. Act 1295 further created three special funds within the MillenniumTrust: theHealthExcellenceFund,EducationExcellence Fund, andTOPS(Taylor OpportunityProgram forStudents)Fund. The funding for the MillenniumTrust comesfrom the tobacco settlement proceedsasprescribed bythe Master Settlement Agreementexecuted on November 23, 1998.

  • The market valueoftheMillenniumTrust Fund atthe end ofFY 2015was$1.5 billion. The cost value of the trust fund was $1.4 billion, with earnings of $52.5 millionand atotal returnrateof3.12percent.Thiscomparesto a market valuein FY2014 of$1.5 billion,earningsof$65.3 million,and atotal return rateof8 percent.

The MedicaidTrust Fundfor the Elderlywascreatedasa trust fund in theTreasurybyAct 143 ofthe 2000 First ExtraordinaryLegislative Sessionandauthorizes theinvestment inequitiesofup to 35 percent ofthe MedicaidTrust Fundfor the Elderly.The corpus ofthe fund is subject toappropriation as specified in R.S. 46:2691.

  • The market valueoftheMedicaidTrust Fund at the end ofFY 2015was$39.2 million. The cost value of the trust fund was $36 million, with earningsof$44.1 millionand atotal return rateof

2.3 percent.Thiscomparesto a market valuein FY2014 of$277.1 million,earningsof$17.3 million,and atotal return rateof4.37percent.

The TransportationTrust Fundwasestablished in 1990, asa special permanent trust fund in theTreasury byaLegislativeAct andthe passage ofan amendment tothe LouisianaConstitution byLouisianacitizens. TheAct allowsthe Louisiana StateBond Commission to issueand sell bonds,notes, or other obligations secured bygasoline and fuelstaxrevenues.Themoniesinthetrust fund are used for construction and maintenance ofstateand federal roadsand bridges, theStatewideFloodControlProgram,ports,airports, transit,statepolicetrafficcontrol projects, and theParish Transportation Fund. TheTransportation Trust Fund had an average invested fund balancein FY 2015 of$358.8 million.

OFFICE OF STATE DEPOSITORY CONTROL-FISCAL CONTROL DIVISION

TheFiscalControlDivision administersthe state's constitutional and statutoryfundscreatedwithin the

Treasury. It providesan accounting ofall receipts, controls all fund disbursements out of the Treasury,

andadministersthe backbone ofthe state's cash management program.

Statecash resourcesare pooled inthecentral depositorybank account bythe Fiscal Control Division which accountsfor and investsthe deposits. These investment earningsarean importantsource ofnon-tax income.

During FY 2015,

  • Through the centralized poolingofdeposits, theTreasuryprocessed13.3 million deposititemsand 67,009 credit itemsin FY2015 resultingin a cash flowof over $31.2 billion compared to 14.0 million deposititems,68,420 creditsanda cash flowofover $29.9 billionin FY2014.
  • There were382 special fundsin the TreasuryinFY2015 which is comparable to 376 inFY2014.
  • Themonth-end balanceoverall cash positionfor theGeneral Fundwasa $446.5 million deficit attheend of FY2015 compared to the $141.9 million deficit at the end ofFY 2014.
  • The interfund borrowing base was$2.5 billion at theend ofFY2015 comparedto $2.8 billion atthe end ofFY2014.
  • The cash balance ofthe RainyDayFund was $469.9 millionattheend ofFY2015 compared to

$444.5 million attheendofFY2014.

DEBT MANAGEMENT DIVISION–LOUISIANA STATE BOND COMMISSION

The Louisiana State BondCommission wascreated in 1968 to centralize andadminister the incurringof state debt. Subsequentto the creation ofthe StateBond Commission,the State Bond and Tax Board, which had beencharged withapprovingthe issuanceofbondsbyvariouspolitical subdivisionsofthe state, was

abolished anditsfunctions were transferred to the StateBond Commission.

The Louisiana Constitution of1974, Article VII,Section 8, grantsconstitutional statusto the Commission and providesthat “No bondsor other obligations shall beissued or sold bythe State directlyor through any State board,agencyor commission, orbyanypolitical subdivision ofthe State, unlessprior writtenapproval ofthe Commission isobtained.”

During FY2015,

  • The Treasuryserviced andmanaged 21outstandingGeneral Obligation (GO)Bond issues withdebt servicepayments totaling$151.3 million.Thiscomparesto 20 GOBond issues with $341.3 million indebt servicepayments in FY2014.
  • In addition,theTreasuryservicedand managed13 outstandingGasFuel TaxBond issues with debt servicepaymentstotaling $114.5 millionand six floatingto fixed interestrate swaps with swap related paymentstotaling$15.5 millionin FY2015.Thiscomparesto12 GasFuel TaxBond issues with $129.6millionindebt servicepayments and eightfloatingto fixed interest rate swapswith $16.2 millionin swap related paymentsin FY2014.
  • Further, theTreasuryservicedand managed two outstandingState Highway Improvement Bondissues with debt service payments totaling $23 million in FY2015 and two outstanding Unclaimed Property Special Revenue Bond issues with debt service payments totaling $5.4 million in FY 2015. This compares to two outstanding State Highway Improvement Bond issues with debt service payments totaling $6.9 million in FY 2014 and two outstanding Unclaimed Property Special Revenue Bond issues with debt service payments totaling $1 million in FY 2014. The payments, however, were funded with bond proceeds and held by the trustee in Capitalized Interest Accounts.
  • Debt issuancesfor FY2015 include:
  • GO Series 2014C $217.885 million (refunding);
  • GO Series 2014D-1 $160.09 million (new money) and 2014D-2 $39.9 million (new money);
  • GO Series 2015A $263.475 million (new money) and 2015B $71.515 million (new money);
  • Gasoline & Fuels Tax Series 2014B $239.91 million (refunding);
  • Gasoline & Fuels Tax Series 2015A $584.985 (refunding) and 2015B $39.81 million (refunding);
  • Louisiana Public Facilities Authority (Hurricane Recovery Program) Series 2014 $162.085 million (refunding);
  • Industrial Development Board of the City of New Orleans (New Orleans Federal Alliance Project) Series 2014 $18.63 million (refunding);
  • Louisiana Public Facilities Authority (UNO Research & Technology Foundation Inc. - Student Housing Project) Series 2014 $36 million (refunding);
  • Louisiana Correctional Facilities Corporation (Prison Enterprises Project) Series 2015 $3.8 million (new money draw down structure with no payments in FY15)
  • ThetotalparamountofNetStateTaxSupportedDebt(NSTSD)attheendofCY2015 was$7.1 billioncomparedto$6.9billionattheendofCY2014.TheamountofpercapitaNSTSDwas $1,523 in CY2015compared to $1,503 in CY2014.
  • StandardPoor’s,Moody’sInvestorsServiceandFitchratingagenciesmaintainedtheState’sbond ratingin FY2015 ofAA,Aa2, and AA, respectively, with negative outlooks from Standard & Poor’s and Moody’s Investors Service and Fitch maintaining a stable outlook.

ADMINISTRATION DIVISION

Unclaimed Property

Unclaimed Propertyislost moneythat isturned over to the state from avarietyofsources; these funds include suchitemsaspayroll checks, old bankaccounts, royalties, utilitydeposits, interestpayments, stock certificatesandlife insurance proceeds. One in six individualsin Louisianahas Unclaimed Property, and the average refund is$900.00.

  • The Treasurycollected $94.8 millionin unclaimed property from businessesand refunded record $34.1 millionto Louisiana residentsin FY2015 comparedto $89.8million in collectionsand $32.3million in refundsin FY2014.

START

The StudentTuition Assistance andRevenueTrustProgram, commonlyreferred toasthe"START Saving Program,"isa529college savingsplan designed to help familiescontend withthe growingcostsof educatingtheir children after high school. The programismanaged bythe Treasuryand administered bythe Louisiana Office ofStudent Financial Assistance, under the direction ofthe Louisiana TuitionTrust Authority(LATTA). LATTAisa public body comprised ofrepresentativesfrom all ofthe state'seducation governingboardsand includesthe State Treasurer and one member from eachhouse ofthe Louisiana Legislature. Because 529Plansareauthorized under IRSrules, START reportsare based on acalendaryear (CY) for tax purposes.

  • At theclose ofCY2015, there were atotal of53,793START accounts, withmore than $633.71million in totalassets. At the close ofCY2014, therewere49,208START accounts,with more than $545 millionin totalassets.
  • At theclose ofCY2015,START fixed income investments managed by Treasury totaled$204.9million, atotal of32.3 percent ofall START monies, andearned arate ofreturn of 1.69 percent.At the close of2014,START fixed income investmentstotaled$169.5million, atotal of31.6 percent ofall START monies,and earned a rateofreturn of2.27 percent.
  • At theclose ofCY2015,equityinvestmentsin START (managed byThe Vanguard Group) totaled

65.34 percent ofall START monies(or $414million) and earned a rateofreturn of 7.27 percentto

8.23 percentdependingon the optionchosen.

  • At theclose ofCY2014,equityinvestmentsin START totaled63.8 percentofall START monies (or $328.7million) and earned a rate ofreturn of 3.40 percentto37.79percentdependingon the optionchosen.

LAMP

The Louisiana Asset Management Pool (LAMP)forlocal governmentscombinestheefficiencyofprivate enterprise with the protection ofpublic policy. It enableslocal officialstopool andcollectivelyinvest fundsto benefit from competitive yields, lower feesand the same level ofinvestmentmanagement otherwiseavailable onlytolarge institutional investors.

The fund isoperated byanon-profit corporation, LAMP,Inc., whose officersinclude the President(State Treasurer),a ChiefExecutive Officer, a ChiefAdministrative Officeranda Participant Liaison, chargedwith day-to-dayoperationsofthe program.

LAMPhasthreeprimaryobjectives:1)maintain a stable net assetvalue; (LAMPhasconsistentlyearned a ratingofAAAmfrom Standard &Poor's, the highest ratingavailable.); 2) offer samedayaccessto funds under management byonline transactions, phone or fax with no transaction fees; and 3) bypoolingfunds, LAMPparticipantsenjoythe level ofprofessional moneymanagement otherwise available onlyto large institutionalinvestors. Thisgenerallyresultsin higher yieldsand lowermanagement fees.

  • Since itsinception, LAMPhasgeneratedover $500millionin interest forLouisiana public agencies.

LAMPassetspeaked at $1.5 billion in April, 2015, and ended FY2015 at $1.1billion,646 participantsand 3,800 accounts (due to account consolidation). Thiscomparesto $1.2 billion inassets, 640participantsand4,640 accountsin FY2014.

SOCIAL SECURITY SECTION

The SocialSecurityDivision isresponsible for administeringthe Social Securityand Medicarecoverage programfor all public state andlocalgovernmentalemployersthroughout theState ofLouisiana.

  • AsofJanuary 2016, a total of168 Social Security orMedicare-Onlyreferenda have beenconductedat94local governmentagenciesin Louisiana allowingapproximately 35,528government workersthe option of payingthe Medicaretax. These figuresincludeapproximately10,000state employees, all universities, 44 parish school boardsand other localagencies.